Article excerpt

The ability to innovate is paramount for small business survival and prosperity. The salience of this ability seems to be growing in importance given the increasing pace of technological change and globalization (for example, Chaston, Badger and Sadler-Smith, 1999, 2001). The ability of small firms to innovate is important not only for their own survival, but also for the well-being of the larger economy (O'Shea and McBain, 1999; Wynarczyk, 1997). During the past few decades, considerable research has been conducted on issues relating to innovation in small business, including adaptive behavior (Barrier, 1995; Comstock, 1995; Nelton, 1995), innovation and growth (Kirchoff and Phillips, 1989; Cowley and Merilees, 2001; O'Connor, Rice and Leifer, 2001; Vinnell and Hamilton, 1999), cognition and learning (Burpitt and Rondinelli, 2000), and new product development (Astebro and Gerchak, 1999; Simon, Elango, Houghton and Savelli, 2002). However, there is still much to learn about the new product development process (Huang, 2002), knowledge management (Wong, 2004), the dynamic capabilities needed to develop new products (Mosey, 2005), and organizational learning (Chaston et al., 1999).

The longitudinal study described here provides a detailed analysis of one of the key phases in the new product development process in a small business. Specifically, our focus is on that period that begins immediately after a "back-of-the-envelope" sketch of a new product idea has been conceived, continues during the development of the idea into a prototype model ready for full-scale production, and ends upon achieving full-scale production of the product. Studies of this "learning to build" (LTB) phase have been reported elsewhere (for example, Dyck et al., 2005), but overall it has received little attention despite its critical importance in organizational competitiveness (Fenwick, 2003; Hatch and Mowery, 1998). Moreover, previous studies generally do not address possible differences between small firms and their larger competitors in managing this process. For example, in their landmark study, Cooper and Kleinschmidt (1986) assessed the extent to which a sample of 123 large and small firms carried out 13 specific steps in the new product development process, but they did not report on differences between large and small firms.

Our decision to focus on the LTB phase is not meant to downplay the importance of market analysis and market development. (1) We focus on the LTB phase because it represents a competitive advantage for small businesses relative to their larger competitors, and because it may be particularly important for owner/managers of small firms to manage interpersonal, intra-organizational teaching and learning flows that occur during this phase. Whereas larger businesses have access to more expertise and explicit knowledge, it may be that smaller firms have a greater capacity to manage the tacit knowledge that is a hallmark of successful new product development (Koskinen and Vanharanta, 2002; cf Rothwell, 1989; Kanter, 1988, cited in Koskinen and Vanharanta, 2002). This advantage is partly a function of the relatively small scale of operations of small firms, which facilitates the ability to transform tacit knowledge into explicit knowledge (Koskinen and Vanharanta, 2002). For example, for innovation to occur, face-to-face communication and interaction among organization members-which is characteristic of small firms-is seen as more important than the more formal and impersonal exchange of explicit information that characterizes larger firms (Harade, 2003: 1738). It is not the total amount of information transferred that is crucial, but rather the utilization of that information that is important (Koskinen and Vanharanta, 2002). The relative informality of small- and medium-sized enterprises' (SMEs) operations can facilitate this sort of interaction or, at the very least, may not present the sorts of impediments that arise with the highly formalized development processes associated with larger businesses. …

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